Utilities like SDG&E may profit from pipeline upgrades

$50 billion to be spent on pipelines nationwide

Big utilities like San Diego Gas & Electric may end up profiting from upgrades to pipeline systems following accidents like the fatal blast outside San Francisco last month, Bloomberg reports.

Utilities will need approval from state regulators for such upgrades, which may cost up to $50 billion nationwide, and that would mean higher rates — and biigger profits.

The story notes that SDG&E's parent company, Sempra Energy, is paying attention to the issue.

Fixing pipelines so they are safer and easier to inspect would represent a “huge capital opportunity,” Mark Snell, chief financial officer of San Diego-based Sempra Energy, owner of the largest U.S. natural-gas utility, said during an investor conference on Sept. 16.

Sempra also owns Southern California Gas Co.

The story also notes that consumer advocates, including an in-house watchdog at the California Public Utilities Commission, will push for utilities to give up some of their profits if they have to spend money to make old lines safer.

Consumer advocates like UCAN, the Utility Consumers' Action Network, say that SDG&E has proposed spending more on its natural gas pipelines than what's needed to keep them safe.

In California, utilities' profits are not based on how much gas or electricity they sell, but on the value of their facilities. Critics say that gives them an incentive to build unnecessary infrastructure to bolster the bottom line.